Exactly one month back we posted article on this blog about 10 IT companies that we track, of which 5 are looking cheap. If you read that post you will notice that we pointed out that it is hard to go against the sell tide and buy in falling stocks for your portfolio. In this post we will look how those companies are standing and how to filter noise from the available new information of those companies.

There are two important things you need to navigate from such circumstances:

  • Need strong and rationale analysis of the company with conviction
  • And you should know it’s up to date valuation spectrum which had factored in new information and logical strategy on how to size that stock in your portfolio.

Once you have conviction in your research, the only thing you have to analyse again is company’s future prospects. Is the earnings downgrade is permanent or temporary in nature? You have to find answer to this question and find the drivers that are impacting its earnings. If it is permanent in nature then it is worrisome. But if those drivers are temporary and will fade away in couple of quarters than your focus should be on the sizing of that stock in your portfolio.

We are running informative series on how to size your stocks in portfolio which you can read and gain insight from. The second part of that series talks about how conviction helps you in sizing your portfolio (to access part 2 make sure you login with your username. If you don’t have login details then please register here).

So here is the updated information about those ten IT companies that you will mostly need to know whether you should invest more or cut down the size of the company in your portfolio.

Company 2016 Profits 2016 IV Expected 2017 profits Expected 2017 IV -range Market price/share
HCL Technologies Rs 5,605 Rs 404/share Rs 7,454 – Rs 8,936 Rs 594 – Rs 820/ share Rs 795
Tech Mahindra Rs 3,159 Rs 364/share Rs 2,985 – Rs 3,943 Rs 302 – Rs 522/share Rs 444
TCS Rs 24,375 Rs 2,280/share Rs 24,834 – Rs 27,750 Rs 2,084 – Rs 2,635/share Rs 2,421
Eclerx Rs 363 Rs 1,685/share Rs 340 – Rs 449 Rs 1,107 – Rs 2,072/share Rs 1,495
Zensar Technologies Rs 312 Rs 681/share Rs 337 – Rs 360 Rs 657 – Rs 749/share Rs 1,028
Infosys Rs 13,678 Rs 733/share Rs 13,941 – Rs 15,342 Rs 672 – Rs 807/share Rs 1,038
Wipro Rs 8,941 Rs 438/share Rs 8,162 – Rs 9,866 Rs 331 – Rs 481/share Rs 482
NIIT Tech Rs 297 Rs 372/share Rs 234 – Rs 325 Rs 224 – Rs 407/share Rs 439
Persistent Rs 297 Rs 376/share Rs 290 – Rs 348 Rs 274 – Rs 375/share Rs 616
Mindtree Rs 603 Rs 428/share Rs 440 – Rs 607 Rs 197 – Rs 331/share Rs 494

 

Important information: intrinsic values of all the businesses change as new information comes out. But they do not change as fast as the price of the stocks. In the long term, data shows that price always follows the intrinsic value of business. Investors do not invest only looking at 2017 valuation spectrum. As almost half of the financial year had past, many might be investing looking at the 2018 valuation spectrum.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.